The Economist concedes, sort of: Actually, Trump’s not been bad for the economy after all

Ed MorrisseyPosted at 8:41 am on January 26, 2018

I say “sort of” because The Economist tries to position itself as far away from Donald Trump’s policies while making the observation that the US economy appears to be flourishing. The tag line on this piece is perfectly descriptive of their approach: “No discredit where none is due.” After a year in office, the best that the magazine can say about Trump is that he’s avoided screwing things up:

Little of what was feared about Mr Trump’s economic policy has come to pass. To some, rising economic growth, which exceeded 3% in the second and third quarters of 2017, combined with accelerating blue-collar wages, suggest that Mr Trump has delivered on his promise to invigorate the economy.

In truth, Mr Trump has benefited from a global economic surge that has lifted confidence—and stockmarkets—across the rich world. His timing with regard to the labour market was particularly fortunate. He came to office with unemployment at 4.8% and falling (it is now 4.1%). Pockets of strong wage growth, and high consumer confidence, are the natural result.

However, Mr Trump has at least not disrupted the economic recovery. His worst ideas, particularly with regard to trade, remain on the shelf. There have been no across-the-board tariffs on Chinese or Mexican imports, as he threatened. In April the president supposedly came close to pulling out of the North American Free-Trade Agreement (NAFTA), which would have been cataclysmic for many firms. But he stepped back from the brink; the deal is instead being renegotiated. Similarly, Mr Trump’s threats to withdraw from a trade agreement with South Korea now look like bravado. Talks to amend that deal, and in particular its clauses regarding cars, began on January 5th.

This particular part of the editorial almost beggars belief. Trump’s attacks on free trade agreements and on key trading partners didn’t make me happy during the campaign either, but it’s beyond churlish to ignore Trump’s purpose in making them. He used those threats to force our trading partners to renegotiate these pacts, none of whom were otherwise inclined to do so. In fact, when Trump began making those threats, all three of these countries declared that they would not renegotiate. The very reason why the talks are in motion for both of these pacts is because Trump threatened to pull out. He had always planned to renegotiate; Trump played hardball to get them to the table.

They make a similarly willful statement of ignorance on the tax reform package, too. The Economist describes it as “more moderate than expected,” in part because the “revenue lost” (which would be future income retained by the people who earned it, mind you) was $1.5 trillion rather than Trump’s original $6 trillion plan, and that he “relented” on a drop from a 35% corporate tax rate to 15% by accepting 21% instead. Why, it’s almost as if The Economist has never been acquainted with the “big ask” method of negotiating, a Trumpian constant throughout his business and political career.

The editors also try to pass off the economic boost of the past two quarters as somehow a predetermined outcome from a constant series of advances. Bloomberg reports that’s simply not true, and that the prospects look even brighter ahead, thanks in part to the tax reform and deregulation that The Economist largely dismisses:

The U.S. economy probably ended last year with the longest stretch of 3 percent-or-better growth since 2005. The $17 trillion question is, can it keep up this performance this late in the business cycle?

Solid consumer spending, accelerating business investment and a housing rebound combined to drive fourth-quarter demand in the world’s largest economy. Gross domestic product expanded at a 3 percent annualized rate after 3.2 percent in the third quarter and 3.1 percent in the previous period, according to the Bloomberg survey median ahead of Commerce Department data due Friday.

Tax cuts championed by President Donald Trump have fueled expectations of an extended boom in capital spending and buoyed household confidence. …

The outlook for the world’s largest economy has been central to discussions at this week’s meeting of the World Economic Forum in Davos, Switzerland, with most executives sounding upbeat. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon told Bloomberg Television on Wednesday that “I’m quite optimistic about the immediate future” and that he didn’t “see the potholes that are going to reverse it.”

And yesterday, Home Depot added itself to a lengthening list of companies sharing the wealth f the tax reform bill with their workers:

Home Depot is awarding its hourly employees in the U.S. a one-time cash bonus of as much as $1,000 following the passage of new tax legislation.

The company joins a growing list of corporations, and many retailers, using new tax benefits to invest in their workers.

“This incremental investment in our associates was made possible by the new tax reform bill,” Chief Executive Officer Craig Menear said in prepared remarks. “We are pleased to be able to provide this additional reward to our associates.”

At some point, The Economist — and Democrats — might be forced to admit that Trump and Republicans had it right on the economy all along. Don’t hold your breath waiting for that day, but feel free to spend your money.